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ACCA Applied Skills · Corporate and Business Law (Global) · Transportation documents and means of payment

Marlow Ltd ships machinery to a buyer abroad. The carrier issues a bill of lading that states the goods are 'to the order of Marlow Ltd'. Which feature of a bill of lading makes it especially useful in a sale where the goods are in transit for several weeks?

A bill of lading is a document of title, so endorsing and delivering an order bill can transfer rights to the goods while they are at sea. It is also a receipt and evidence of the carriage contract, but it does not guarantee payment or customs clearance.

  1. AIt is a document of title, so transferring it by endorsement and delivery can transfer rights to the goodsCorrect
  2. BIt guarantees that the buyer will pay the price on the due date
  3. CIt proves that the goods have passed customs inspection at the port of arrival
  4. DIt replaces the need for any contract of carriage between shipper and carrier

Explanation

A bill of lading performs three functions: receipt for the goods, evidence of the contract of carriage, and document of title. Because it is a document of title, an order bill can be endorsed and delivered to pass rights to the goods while they are at sea. It does not guarantee payment, prove customs clearance or replace the contract of carriage.

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